When it comes to competitive bidding, now is not the time to go wobbly

The other day in this blog, I asked the following question: "Can the industry have it both ways? Can it embrace the economists when they say the current program is greatly flawed, but give them the cold shoulder when they propose what, in their opinion, is a workable alternative?"

The answer, according to John Shirvinsky, executive director of the Pennsylvania Association of Medical Suppliers (PAMS), is "Yes."

After reading the email that John sent to me yesterday, I'm inclined to agree.

Mike Moran

Here's the email:

I realize that a lot of people are tempted to hit the panic button on competitive bidding now that Round 1 has gone live.  But allow me the opportunity to encourage everyone that all is not lost yet and that now is exactly the time to redouble our wildly successful efforts to outright repeal this very bad program.  As the late British Prime Minister Margaret Thatcher cautioned President George H. W. Bush prior to the first Gulf War, "Now is not the time to go wobbly."

For those who may be rolling their eyes at my use of "wildly successful" in the same sentence as "repeal" of competitive bidding, allow me to remind everyone of where we've been and what we've accomplished. When an economic analysis of CB was released in early 2008 and a handful of Round 1 state associations began a push to stop the program from being implemented, many dismissed the effort as quixotic--a waste of time and effort. Yet, when the program's shortcomings started to become apparent, the momentum created by this report was utilized to undo the original results and to delay the program.

In the 111th Congress, additional study by free-market economists--economists who found that the use of an auction mechanism in an existing and competitive market such as the HME industry was both counterproductive and anti-competitive--was utilized to convince 259 congressional representatives to sign on in support of an outright repeal of the poorly designed bidding scheme. That number represented an overwhelming majority of the U.S. House of Representatives and is a tally that is rarely seen in that body. Wildly successful, wouldn't you say?
Certainly, none of our efforts to highlight the obvious failings built into the CB program has had an iota of impact on CMS and the proponents of the anti-competitive bidding scheme, but that should come as a surprise to no one. Medical equipment and supplies represent the last vestige of small business entrepreneurship and true competition in U.S. healthcare. Truth be told, that is a very bad thing in the minds of the Medicare bureaucracy precisely because of the impact that so many small providers can have with the members of Congress who determine what CMS can and cannot do.

Everyone who has spent any time around the HME business understands the undeniable truth that CMS wishes to dismantle this industry. CMS views the elimination of 80% to 90% of DME companies as a very good thing, indeed. They see no downside--for them--to accomplishing this goal through the creation of regional oligopolies. We certainly should.  Agreeing to "reform" the bidding process is really a concession to the notion that there are too many participants in home medical equipment and an admission that eliminating a majority of the competitors in the HME market has no downside worth fighting over.

The question is posed, "Can [our industry] embrace the [auction] economists when they say the current program is greatly flawed, but give them the cold shoulder when they propose what, in their opinion, is a workable alternative?" The answer here is both obvious and easy: "Why not?"  We are all familiar with the phrase, "I agree with you to a point," because we all have found ourselves in the position of being partially in agreement on any number of matters. Why not ask the other side of that question? "Can we embrace the findings of the free-market economists when they say that the program is fatally flawed, but then ignore their warnings of anti-competitive results and support a redesigned bidding scheme?"

I find no conflict here whatsoever.  We need to remember that TWO schools of economic thought have weighed in on this issue--free-market economists and, more recently, economists with a specialty in designing auctions. I agree with the auction experts that the current design of the Medicare bidding plan is horribly flawed from a technical standpoint. I further agree with the free-market economists who believe that the program is fatally flawed from a practical standpoint and will needlessly result in the dismantling of an otherwise competitive industry where the competition clearly works to the benefit of the consumers of home health care.

The real question is: With whom do you agree more?

I happen to agree more with the free-market economists.  I firmly believe that any government program that forces a majority of good, solid, law-abiding business owners to lose their life's investment, to lose their livelihoods, to fire their workforces and to cease caring for their customers to be an abomination and an example of government overreach that has no place in our society.
This year I enter my fifth decade of working as a professional advocate and political strategist.  My experiences have covered a lot of ground and a lot of very big issues at all levels of government.  One thing that I have never seen in all of that time is an interest group--particularly and industry trade group--volunteer to cannibalize its own ranks.

We are all aware that the current bidding scheme is designed to eliminate 80% to 90% of HME providers from doing business with Medicare. Let's assume that a redesigned bidding program reduces that number to 70% to 80%.  Or be wildly optimistic and say than only 60% of existing providers will be eliminated. How does an industry trade group that is organized to support the best interests of an entire industry come to the conclusion that putting a majority of that industry at risk of financial ruin is a good plan?  That is bottom line that we must consider in the repeal vs. reform debate.

It is understandable that individual companies, believing that they are well positioned to prevail in the long run, may support such an industry-wide consolidation. As economists will remind us, most companies view competition as an annoyance and welcome the opportunity to corner a market. That's human nature. But when individual companies voluntarily join together in creating a trade association to represent the best interests of that entire industry, that kind of thinking needs to be checked at the door. The industry-wide trade group has no more business picking winners and losers than does the federal government.

There are a few things that we need to agree on as an industry. Competition is good. Free markets are good. Ease of entry to and exit from a market is good. Small, privately owned companies are good. Large regional companies are good. Even-larger national companies are good. We are all on the same side.

What is bad is Medicare's fatally flawed bidding program. Everybody in the DME industry (even those advocating a redesign compromise) agrees that we would be better off if CB were repealed. The only way that happens is if our industry stands up, speaks out and urges Congress to do the right thing and pass a repeal bill. Nobody else will fight this battle for us. If we choose to walk away from the repeal fight, a very busy Congress will be only too happy to oblige. Now is not the time to go wobbly.

John Shirvinsky
Executive Director
Pennsylvania Association of Medical Suppliers